Re: You've GOT to be kidding me

Let's say we use the card to make $20k purchases from the US Mint (which many have done). Since the mint has been free shipping, once we receive our package, we deposit the coins at our bank, and pay our bill accruing 20k of points which we can transform into roughly $210 per month of Amazon gift cards.

In the above small example, do you feel Amex has the right to inquire about your spending? Or, ability to pay?

That's referred to as "coin churning" and AmEx will F/R you for it. The mint also has restricted purchases to $1,000 every 10 days I believe.

This had occured several years before this abusive arbitrage brought an end to the practice.

If it weren't for the widespread abuse, do you think the restrictions would be there?

Re: You've GOT to be kidding me

Let's say we use the card to make $20k purchases from the US Mint (which many have done). Since the mint has been free shipping, once we receive our package, we deposit the coins at our bank, and pay our bill accruing 20k of points which we can transform into roughly $210 per month of Amazon gift cards.

In the above small example, do you feel Amex has the right to inquire about your spending? Or, ability to pay?

That's referred to as "coin churning" and AmEx will F/R you for it. The mint also has restricted purchases to $1,000 every 10 days I believe.

This had occured several years before this abusive arbitrage brought an end to the practice.

If it weren't for the widespread abuse, do you think the restrictions would be there?

No

I'm glad it came to somewhat of an end. But you're right, it's old news in the credit card world.

Re: You've GOT to be kidding me

Once upon a time, the restrictions that exist now regarding purchase quantity and frequency didn’t exist. For several years, this arbitrage existed until the Mint responded to the abuse many, many, many years later.

I agree with you that how I spend my money shouldn’t be anyone’s business but my own. However, from a business’s perspective, how you use my service is certainly a part of my business. I can’t dictate what you spend, but I can dictate whether or not to provide you my business service. As with all businesses, access to my product and service isn’t a right, but a mutual agreement. You can refuse my service—for any reason; and, likewise I ought to be able to refuse service to anyone—for any reason, except for ethnic, gender, and lifestyle discrimination.

Take Amex for example. They utilize a spendcentric business model to drive their growth. One of the keys to the spend-centric model is the ability to "merit premium economics from merchants" - in other words, the higher merchant discount fees that merchants pay to accept American Express. Combined with higher spending per card and higher fees per card, Amex derives a revenue advantage over other issuers. Offsetting those higher revenues are higher cardholder acquisition costs and higher ongoing support (and rewards) costs while still enabling Amex to generate higher per account profits.

In other words, Amex justifies higher fees (which Visa/Mastercard is hoping the Surpreme court will rule anti-competitive) to merchants by promising more spending from cardholders. They take this higher fee passing it on to cardholders, which in turn encourages them to spend even more on the card. Hence, the PR gold’s 15k bonus when 30k is spent; or, the business gold 25k bonus when 50k is spent.

What does this have to do with cash purchases? If the dollars spent aren’t within the spirit of their strategy, their models will break down. For example, if the majority of SPG card holders utilize cash like transactions to accrue reward points—though Amex receives a fee—Starwoods hotels (Nieman Marcus or any other Amex exclusive merchants) will likely end the exclusivity since the dollars spent isn’t at their facilities. The entire premise for Starwoods to make concessions to Amex is the promise of more revenue.

The cash/currency/App O’Rama arbitrage completely breaks down this model. If Amex allows it to persist, they will no longer be in a position to charge the higher merchant fees.

You are at the top of the game here, I admire what you've written, and I cannot agree with you more.

It's all business, on every side of the transaction, and on an "at-will" basis...for everyone involved.

AMEX bombarded me with offers...for years...and I finally accepted one just recently.

"Spend a grand in three months, get $750 back in rewards cards". I spent the grand the day I got the card in the mail. I was going to spend it anyways, with or without AMEX.

I do not check spending limits, nor do I call them. The day that they refuse a transaction for me, or want me to send them a 4506, they can stick it. And that's my privilege, just as it's their privilege to deny a transaction.

Let's say we use the card to make $20k purchases from the US Mint (which many have done). Since the mint has been free shipping, once we receive our package, we deposit the coins at our bank, and pay our bill accruing 20k of points which we can transform into roughly $210 per month of Amazon gift cards.

In the above small example, do you feel Amex has the right to inquire about your spending? Or, ability to pay?

That's referred to as "coin churning" and AmEx will F/R you for it. The mint also has restricted purchases to $1,000 every 10 days I believe.

This had occured several years before this abusive arbitrage brought an end to the practice.

If it weren't for the widespread abuse, do you think the restrictions would be there?

No

I'm glad it came to somewhat of an end. But you're right, it's old news in the credit card world.

I'm certainly not defending nor will I tolerate any creditor unreasonably inquiring about my spending habits. However, if Amex didn't inquire through FRs, this abuse (and, many others) will only continue unabated.

The end result is that those who didn't participate in the abuse will incur a higher cost through lesser rewards.

Re: You've GOT to be kidding me

I've got Amex and nobody forced me to apply for it or to accept their card. I had other options. I accepted their card and use it knowing the rules upfront. So if I approach them looking for credit, why is it so unreasonable to require that I abide by those terms that I agreed to in the first place? Note to all--Amex does financial reviews from time-to-time on some of their customers. If you don't want to submit to a possible F/R, don't apply for their card. They are choosy at times and very conservative when it comes to customers and transactions. I can promise you this--almost everyone in the forum is agreed on this point, so why blame them when they are?

Re: You've GOT to be kidding me

I do not check spending limits, nor do I call them. The day that they refuse a transaction for me, or want me to send them a 4506, they can stick it. And that's my privilege, just as it's their privilege to deny a transaction.

Re: You've GOT to be kidding me

Open123: How can you purchase a home without providing your tax return to the underwriters? And what information would an F/R turn-up that would not be on a 1040? My point is that homeowners have already submitted to this in the process of getting approved for a mortgage.

Re: You've GOT to be kidding me

Open123: How can you purchase a home without providing your tax return to the underwriters? And what information would an F/R turn-up that would not be on a 1040? My point is that homeowners have already submitted to this in the process of getting approved for a mortgage.

Yes, if I were applying for a mortgage, I would certainly agree to dislosing my personal tax returns to not only the lender, but my other creditors as well, since I'll be taking on such a large obligation.

Aside from specific and reasonable requests, I would likely reject any release of my personal finances. If my creditors are concerned with my ability to pay, all they'd have to do is audit my business tax returns.

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